Rethinking GDP in Asia

GDP has been a cornerstone of modern economic thought for decades. An increase in gross domestic product can bolster a government’s claims about its successes or can send a governing coalition scrambling at the end of a mandate and the days leading to the next Election Day. To some of us in the older “developed” economies (North America, Western Europe, Japan), stagnant GDP growth is an ominous sign about these nations’ future, while the BRIC economies (Brazil, Russia, but especially India and China) boast economic growth rates that often reach into the double digits. Meanwhile, the PIGS (Portugal, Ireland, Greece, and Spain), which enjoyed stellar economic performance earlier in the decade, have been enduring wrenching economic and social problems. The rise and fall of GDP is always in the center of discussions over these nations’ performance.

Personally, the measurement of a country’s success by adding up the total output of a country’s good and services always made me uncomfortable. I remember graduate school classes, during which I often fidgeted, where economics professors always dismissed issues related to economic, social, and governance (ESG) performance. Economists were solely focused on empirical data—I suppose it was up to social scientists to sort out problems like unemployment, pollution, and other issues affecting people and the planet. Perhaps GDP really should stand for Grand Dogmatic Preaching. Well of course, now I realize my random thoughts a few years back were hardly unique. More professionals in business, academia, and non-profits are talking about a “triple top line,” the integration of measures that focus on the quality of life, not quantity of goods.

Now Asian leaders are questioning the tradition of relying of GDP metrics in evaluating a country’s performance.

Starting in the 1980s, the Four Tigers (Taiwan, Singapore, Korea, and Hong Kong) were seen as a model of economic performance that other countries should follow. All of these countries have made impressive progress, but not without a price: Hong Kong has oppressive pollution (in fairness, much of it is from Guangzhou); Kim Young-sam’s presidential administration was so focused on a meeting the magic number of US$10,000 per capita income that long story short, the International Monetary Fund bailed out the country in 1997-98; and Singapore recently suffered from a tanker collision that spent 18,000 barrels of oil spilling into the Singapore Strait. The cumulative lessons: more economists and policy experts in Asia are reevaluating the focus on economic growth as a measure of a nation’s success.

Economists like Bhanoji Rao and civic leaders like Christine Loh have insisted that a culture of consumption will have a huge negative impact on Asia in the long run. Andy Xie, a Shanghai economist who once worked for Morgan Stanley, has noted (among many others), that China’s 1.3 billion people cannot live like those in the West. And more governments are listening: China now demands that environmental achievements matter as much as economic progress when it comes to promoting officials, and last week it surpassed the United States as the world’s largest investor in renewable energy. Korea’s current President, Lee Myung-bak, made his mark when Seoul’s mayor by adding more green space to the city’s Lego-like landscape. Could it be that the 21st century will be the Asian century after all—because economic theory and metrics will be turned upside-down, led by the region that invested so much in GDP metrics?

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